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SEI Investments Co.’s (SEIC - Analyst Report) second-quarter 2013 earnings came in at 31 cents per share, missing the Zacks Consensus Estimate of 34 cents. However, it surged 10.7% from the year-ago earnings of 28 cents.

The year-over-year improvement was aided by top-line growth, partially offset by higher expenses. Continued improvement in asset position and steady capital deployment activities were the other highlights of the quarter.

After considering certain non-recurring items, net income attributable to common shareholders came in at $83.5 million or 47 cents per share. This compares favorably with the year-ago earnings of $49.6 million or 28 cents per share.

Behind the Headlines

Revenues at SEI grew 13.8% year over year to $274.6 million in the reported quarter. However, this lagged the Zacks Consensus Estimate of $278.0 million. The improvement was mainly attributable to a rise in asset management, administration and distribution fees.  

Total expenses stood at $216.6 million, up 15.6% year over year. The rise was primarily due to higher expenses in software royalties and other information processing, brokerage commissions, compensation, benefits and other personnel, stock based compensation, consulting, outsourcing and professional, data processing and computer related costs, facilities, supplies and other costs, amortization and depreciation cost as well as sub advisory, distribution and other asset management costs. However, interest expense came in at $0.1 million, up 0.9% year over year.

Operating income increased 7.8% year over year to $58 million.

Asset Position

As of Jun 30, 2013, assets under management rose 12.4% year over year, but marked a sequential decline of 0.2% to $204.2 billion. Total assets under administration as of that period were recorded at $507.2 billion, up 19.6% from $424.0 billion as of Jun 30, 2012 and 2.8% from $493.4 billion as of Mar 31, 2013.

Capital Deployment Activities

During the quarter, SEI repurchased 1.7 million shares of its common stock for $50.5 million.

Our Viewpoint

SEI’s increasing investments and growing need for risk management and alternative investment solutions within the financial service industry are expected to contribute positively to the company’s financials in the future. Moreover, its sound capital deployment strategies are impressive. Further, the company’s strong asset inflows are expected to benefit its overall growth going forward.

However, we remain apprehensive about the persisting low interest-rate environment and a stringent regulatory landscape.

Among other investment management companies, Lazard Ltd. (LAZ - Analyst Report) is scheduled to report its second-quarter 2013 earnings on Jul 25. Legg Mason Inc. (LM - Analyst Report) will report its fiscal first-quarter 2014 earnings on the same day. Alongside, Franklin Resources Inc. (BEN - Analyst Report) will report its fiscal third-quarter 2013 earnings on Jul 29.

Currently, SEI carries a Zacks Rank #3 (Hold).

 

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